my recent article on Morocco publised in the IPA alert and MPC

Why Northern Morocco could be the next big thing.

Having spent the last few days in Morocco and around 6 months researching the market I feel a bit more qualified to put together my views regarding the potential for capital growth and future yield potential in the property development market. I am going to concentrate on the area around Tangier but new developments springing up are situated in Saidia near the Algerian border and along the Atlantic coast.

Conservative estimates of 15% growth per annum for the next 5 years and double digit yields are really possible.

Overview
Morocco is located in northern Africa but only 3 hours away from the UK and only 35 minutes away from Spain at Algeciras and Tarifa by fast ferry.
Morocco is very diverse geographically with huge stretches of coast both on the Atlantic side and on the Mediterranean side. Internally there are great plains and three large mountain ranges where in places skiing is possible. A big part of the country is covered in desert providing some hot weather for the southern part of the country.
The power in Morocco has changed hands a number of times in the past century being divided up between Spain, France and Britain, along with centuries of Moorish and Berber culture Morocco has a very interesting mix of new and old.

The country still has strong ties with Spain who retain a number of enclaves (much like Gibraltar) at Ceuta, Melilla, Penon de Velez de la Gomera and Penon de Alhucemas.

It also retains close links with France and Morocco is the third most popular holiday destination for the French. The legal system along with the education system is modelled around the French system.

Morocco has good relations and strong links with the UK and America with strong textiles and manufacturing with M&S having around 30% of its knitwear produced in Morocco.

Things began to change when the new King Mohammed VI came to power in July 1999, the new king is a reformist /moderniser and set about improving links with the western world and improving its human rights issues, corruption and religious extremism, and introducing more equality to women.

At only 42 years of age the King was educated in Europe and spent time in America and France he studied law and wrote a number of prominent articles regarding the North Africa MAGREB (Morocco, Algeria and Tunisia) countries.

The King was once an international standard golfer.

After 6 years of power Morocco seems a stable place to invest with low inflation and a stable currency the Dirham, the currency is not fully exchangeable outside Morocco but is worth around 16/ and 11/Euro it moves very much in line with the euro.

There are no laws or complications that would stop foreigners investing in property or land and the legal system is based on the French system with notaries which some of you may be familiar with. The legal costs are around 5%, much less than the 10-15% in France and Spain.

One of the key areas to improve employment was tourism, the brief outline of the Plan Azur/blue plan or 10:10 plan, as its called is to increase tourism from 2.5m in 2001 to over 10m in 2010. In 2004 the tourism figures were around 5.6m.

This involved huge investment of $5bn from the King and his Government and large investment in the ports areas from the Americans. There is a huge port being built in between Tangier and Tetouan this is going to be called the Golden Mediterranean and this will take freight away from Tangier port, returning it to a more tourist destination. The new port is more than likely going to be the main hub into Africa with good road links being built around it. The Americans have been given the contract to manage this port for the next five years, which will also bring American workers into the area.

These projects involve the improvement of the roads we saw and the new motorway between Tangier and Tetouan is being built along with the new airport at Tangiers. The new motorway will make a good coast road and inevitably new developments will spring up around it, as the coast is not very well populated unlike Spain.
The main property areas offering the widest choice of property are around Tangier on the northwest tip, Casablanca on the Atlantic coast and inland at the very cosmopolitan Marrakesh.
Inland and the Atlantic coast have fairly established tourist resorts and therefore property prices tend to be higher but there are new developments along the Atlantic coast offering value for money along with most of the cities which still have riads (old traditional houses set around a courtyard) at realistic prices and with many needing either some TLC or major renovation.
Access
Access has been the problem in the past even though Morocco is so close to Spain but this is changing fast.

Airports are being upgraded and new ones built, with a new airport at Tangier and with the Open skies agreement being signed ahead of the 2007 schedule last month (Dec 05) Monarch, Ryan Air and Easy Jet have all been rumoured to have signed up to Tangiers and Tetouan airports.

GB Airways (part of BA) have just announced that it will fly to Tangier shortly for 169 return. Thompson have also announced it will fly to Agadir for only 29 each way.
Atlas blue (part of Royal air Maroc) is flying to Morocco for 60 return.

These deals will begin to accelerate in 2006, as Morocco is very much an untested market for the budget airlines, yet less than 3 hours away. It will also put pressure on the flag carrier Royal Air Maroc to follow suit, it has recently committed to increasing its fleet by 50% in 2007.

Tetouan which is about 1 hours drive west of Tangiers has an international airport that is little used, but the large hotel groups, Club Med/Sofitel/Accor in the area have been lobbying the governor to open it up more regularly as it is currently being used for internal flights only.

Car hire at the moment in Morocco is expensive but this should change when the bucket Airlines get established.



A new train station has just been built at Tangier, the train network in Morocco is excellent. It was built by the previous European rulers, France. We all know how good the French train system is, wonder why they didnt ask the Brits to undertake the task!. In 2008 there are plans to build a road and rail tunnel from Gibraltar, which means getting to your destination by train would be possible.

Developments
There is a plan to build hotels housing approximately 60,000 beds. Most of this development will take place in two main areas, which are Tangiers-Tetouan and Saidia. This is estimated to take place between now and 2010 and there are also funds for existing Moroccan hotels to apply to upgrade and refurbish.

Developments have recently started to spring up on the Mediterranean side around the port of Tangier and towards the town of Tetouan. We saw three developments that were being offered by UK agents these were situated at the Marina Smir development at Restinga where Phase 2 is almost complete. This is based around the successful 2 bed, 1 bathroom apartment with balcony and these apartments are around 71sqm. All but a handful of the 180 apartments have been sold.

The Marina Smir development started just over 12 months ago and sold for around 35k but now the selling price is just short of 50k. The building work is expected to be completed ahead of schedule for the 2006 summer season.

The Mirador golf complex of 144 apartments is all but sold out. Apartments are 1km from the existing 18-hole golf course at Cabo Negro green and fees charged are around 20 per day. A further 200 metres on the other side is the unspoilt beach and a shuttle bus is provided to the golf course and beach. During the first phase, prices here started at 32k but have now risen to 40k. This development should be completed around March 2007 in time for the summer season. The developers hint this development may be sold out as early as February 2006 having been released in October 2005

Development at Playa Vista which is due to start in April 2006 is further up the coast and will be a self contained resort with direct access to the beach and a new marina with sea views to all apartments. Approximately half of the 400 apartments have been sold with a starting price of 45k.

More phases are planned for Marina Smir, and Playa Vista are expected to confirm phase II very shortly, which contains 500 apartments.

The build quality at the development we saw at Marina Smir Phase II was exceptional and certainly comparable with Spain. The big plus point for Morocco is the time scales which are likely to be achieved as labour is more readily available in Morocco than it is in Spain where delayed developments are commonplace.

Quotes from a developer.

Richard Padgett of the Playa Vista development company said It is no surprise that the pioneering investors are streaming into the Northern Moroccan Mediterranean Coast with its endless white beaches & 300 days plus sunshine every year"
"What has been surprising are the numbers of apartments clients are purchasing, it is not unusual for buyers to order 10 to 20 apartments at the present pre-construction prices. " However with a new phase of apartments starting at 27.5k for Front Line Ocean views and nestling next to the 200 berth Marina, it is difficult to understand why buyers are not purchasing in the 20's to 30's"
"With the King of Morocco's summer palace sited only a few miles away from Playa Vista on the stunning coast line of clear blue & turquoise sea. Buyers are secure in the thought that their overseas property is located in the region that is fit for a King"





Other Areas
In Saidia, which is around 700 miles from Tangier, large developments are planned and this area is close to the closed Algeria border and has two international airports and some very good beaches. Again golf courses are being built to broaden the appeal to likely visitors. This development will come on stream in 2008 with guide prices starting from around 75,000 for a 2-bed apartment.

The first phase of the Jardin de Fleur in Saidia a 72,000 sq meter development have just been issued (Jan06) with large 2 bed apartments of 140sqm being price at 107k fully furnished, The 3 bed Hibiscus Villas will be around the 180k mark on a 300sqm plot. There may also be rental guarantees for this development along with a 60% local mortgage.

There are two larger developments on the more traditional Atlantic coast being built by Emaar one called Bahia Bay between Rabat and Casablanca, centred mainly on golf construction is expected to start in early 2006 on the 531-hectare site. In Marrakech there is a development called Amelkis II again which is a luxury residential golfing complex that will allow individual buyers to purchase plots of land and design and build their ideal home. These developments involve around $300M of investment on a 1.25 million sq metres, which have just started.

Another new development at Asilah was recently announced, which is just 30 miles south/west of Tangiers along the coast. The cost of a 2-bed apartment starts at 42k, the 400-apartment development is being marketed by exclusively Prestige properties.

Rentals/Tax
The season on the Mediterranean coast currently lasts for 10-12 weeks and demand exceeds supply resulting in high peak rental rates. The demand comes mainly from Moroccans travelling back from Spain and France and travelling north as the weather is cooler than the southern part of the country.

A two-bed apartment is fetching around 150 euros per night in the peak season and around 75 euros per night outside July/August as many amenities close down outside of these dates.

The key to improving yields is to extend the season to a more European market after flights direct from the UK open up. Assuming you managed to rent 85% of the peak weeks this would equate to 8,000 euros before costs, which would more than cover costs for the year. Anything outside the peak season would be a bonus, but with 330 days of sun there should be plenty of opportunity.

All the developments we visited were expecting to provide full management services along with collections to and from the airports if necessary.

Unlike Spain site charges are only expected to be around 400 euros per annum. Tax of rental income is exempt for the first five years and capital gains tax is also exempt below 40,000 with the rate after this being 20%. There are also no inheritance tax laws, this is only subject to an administrative charge and full repatriation of funds is also in place.

Weather
The weather is fairly consistent for much of the year with lows in December/January at around 60 degrees and the high season in the early 90s. Morocco claims to have around 330 days of sunshine, which is the same as Spain.

Finance
Most investors are buying with cash or developers are underwriting 60-70% LTV, this means deposits of 30-40% are likely, this will reduce over time as the market matures and when capital becomes more available as many of the Moroccan banks are French owned. I also spoke to Simon Conn at Mortgagesoverseas.com and he said, They are currently working on a couple of products in Morocco and we hope to have this up and running within the next 3-6 months

Cost of living
Generally Morocco is not a rich country with average daily wages around the 10-euro mark therefore the basket of goods is much lower than Spain and the UK. The only item, which can be more expensive, is alcohol as it is a Muslim country.

Eg A cup coffee in an upmarket Tangier Cafwas 8 dirham which equates to 50p
A meal for 2 in Tangier Mogodom restaurant including wine was 250 dirham, which equates to only 15

In Conclusion
Property prices are very good value being less than half of that in Spain.
Huge investment in tourism infrastructure by the government
Economy very stable as is the currency with good GDP growth and inflation under control
Build quality is good and more that comparable to Spain
Good rental yields are achievable
Tourism increased 18% in 2004
Good capital appreciation achievable
Good climate all year around
Improving access to Finance
Cost of living so much lower than Spain/UK

If anyone wants to contact me to discuss any of this further I can be contacted by email
at rxcbs@yahoo.co.uk.

I can also provide details on the majority of the developments around Tangiers and have good links with the developers. I am currently awaiting further details on the 27.5k apartments, which are not yet released to the public and will be happy to pass these details on shortly. I have also got a good contact with the developers of Le Jardin De Fleur at Saidia.

We made a purchase at Mirador Golf in the first phase, and I am convinced it will be a good long-term investment.

o.k its upping the stakes from shares but must be worth a look ?

2 bed unit in Morocco cost me 33k had to put 40% down nearer 50%
when add in fees but it is expected to be worth 65k next year and will
give 5k-8k rent

Gordon

a super article and good luck with your investment.

A quick question - how politically stable is the country and also is there a political threat with regards to terrorism? I believe it has started to become the "route of choice" for Muslims through to Europe (via Spain) and there has been an increasing number of probs at the border - this is only based on a few articles in the broadsheets/tv programmes - any light you could shed on this?

Gordon,
Just to back up what you say, the missus and I have been investigating this place for weeks now and have concluded exactly the same as you, but with the interesting twist that we are dithering over the Muslim problem, like Fundy. My concern is a little more along the lines of how things would be if there was a west versus Muslim collision over Iran / Iraq et al.
Thats what has kept my cash in my wallet so far.
Alan

Gordon-happy to receive details when you have them. it sounds tempting. AM have my contact details. cheers MP I have been looking at Crete---poor quality building work and Majorca--expensive!!

I think the muslim problem is over stated the last bomb was in casablanca in 2003
and didnt target tourist.
Morocco has a king who controls the 'moderate' government the US is investing heavily in Morocco and the king is more western then his father, so there is no place for extremism.

moneyplus send me an email at rxcbs@yahoo.co.uk and I'll let you have more details

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cheers mp.

Morse shares fell 18.25p to 80.75p after the consulting, support and software group warned its German and Austrian businesses could incur losses of around 1 million pounds in the second half and full year. The company blamed worse than expected trading in April and the adverse timing of orders and deliveries in the fourth quarter. Meanwhile, Morse tempered the bad news, indicating that trading within the rest of the group remained satisfactory.

KD.

I feel quite smug now.


Morocco to be 'a hit' with foreigners in 2007

Morocco is set to be the top overseas summer hotspot this year, new research has revealed.



According to Rightmove, Morocco is one of the fastest-growing destinations for both property investors and holidaymakers.



Article Date : Wednesday, March 14, 2007



Morocco is set to be the top overseas summer hotspot this year, new research has revealed.



According to Rightmove, Morocco is one of the fastest-growing destinations for both property investors and holidaymakers.



Lush gardens, olive groves and palm trees, as well as medieval alleyways and vibrant market stalls, all make Morocco a favourite for tourists, which is why investors are starting to invest in property for renting.



The property firm found that flight bookings to Marrakech rose by 295 per cent last summer compared to the previous year.



"Flight fares to Morocco have dropped dramatically", commented spokesman Justin Figgins.



"This makes the destination a more attractive investment prospect for those looking to cast their nets further afield in search of a holiday home that is a little out of the ordinary."



Rightmove also revealed that average property prices in Morocco currently range between 100,000 and 125,000.



The Independent recently reported that a record number of Brits are buying property in Morocco and enjoying capital gains of at least 20 per cent a year.




source www.allnewmorocco.co.uk

Talk in the papers of a take-over this week @25p.

anyone watching MOR lately? couple of director buys late september... they seemed to get it right last time